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Preferred Risk Policy Eligibility Extension

Preferred Risk Policy Eligibility Extension

There’s good news for property owners who have been newly mapped into a high-risk flood area since October 1, 2008. The National Flood Insurance Program (NFIP) offers a cost-saving insurance option that may benefit them. If a structure has been newly mapped into a high-risk flood area on or after October 1, 2008, the property owner may be eligible for significant savings with the NFIP’s Preferred Risk Policy Extension. This extension provides temporary financial relief and additional time to save while FEMA completes its analysis and implementation of premium rate revisions put in place by the Biggert-Waters Flood Insurance Reform Act of 2012.

Fact Sheet

The National Flood Insurance Program (NFIP) offers the Preferred Risk Policy (PRP) Eligibility Extension, a cost-saving flood insurance coverage option for property owners whose buildings are newly mapped into a high-risk flood area.

FLOOD MAPS CHANGE – FLOOD RISKS CHANGE

Since 2003, FEMA has led a major effort to update the nation’s flood maps to reflect current flood risks. FEMA is continuing to provide new maps through a program known as Risk MAP (Risk Mapping, Assessment & Planning). The new maps are digital, easily accessible, and represent the most accurate flood risk data available.
As new maps have been issued, many property owners have learned that their risk of flooding has changed. And for some, the change has meant new flood insurance requirements. If a building in a moderate- to low-risk flood zone is mapped into a high-risk Special Flood Hazard Area (SFHA), most lenders will require flood insurance.
Before January 2011, a property owner could buy a lower-cost Preferred Risk Policy (PRP) before the new flood maps became effective, but the policy converted to a more expensive standard-rated policy at subsequent renewals. On January 1, 2011, FEMA extended PRP eligibility, allowing the lower-cost PRP to be written for two years after a revised flood map’s effective date.
Beginning January 1, 2013, FEMA continues to make the PRP available for properties that were newly mapped into an SFHA since October 1, 2008, even after the two-year extension ends. The PRP option will continue until FEMA completes its analysis and implementation of premium rate revisions put in place by the Biggert-Waters Flood Insurance Reform Act of 2012.

ELIGIBILITY FOR THE PRP EXTENSION

To be eligible for the PRP, the building must meet certain loss-history requirements. If there have been two disaster relief payments, or claims for flood losses of $1,000 or more, or three losses of any amount, the structure is ineligible for a Preferred Risk Policy.

Owners of buildings that meet the loss history requirements and were newly mapped into a high-risk flood zone (shown on a flood map as a zone beginning with the letter “A” or “V”) since October 1, 2008, are eligible for a PRP. Property owners should contact their insurance agent to obtain or renew their insurance using this low-cost option.
Insurance agents will be required to provide documentation to their insurance company showing that the building is eligible for the PRP extension, including the current and prior map information. Both historic and current flood maps can be found on FEMA’s mapping website (http://msc.fema.gov). The community’s floodplain manager also should have the maps on file.

STAY PROTECTED AND SAVE

Property owners need to understand that they still are at a high risk for flooding. This extension provides them additional time to save and prepare for paying for the full risk premium when it is implemented. The extension also provides more time for the community to upgrade or mitigate flood control structures to meet FEMA standards and reduce the flood risk.

For additional information about flood insurance and the PRP Extension, visit www.FloodSmart.gov and www.FloodSmart.gov/PRPExtension or call the NFIP Help Center at 1-800-427-4661.

2 Comments

  1. Reply Armando

    No. Actually, in some cases, you can’t do that. Flood insurance is funny it’s colmpetely controlled by the National Flood Insurance Plan, a division of FEMA. You HAVE to follow their rules. You cannot just insure for the lowest amount of coverage , aka, the mortgage balance on the house. You will have to insure for 80% of the replacement value of the house (you do NOT have to insure contents!), but there is a maximum dollar amount that you can insure I THINK it’s $250,000 for a single family home, but it’s been a while. You can’t just pick $35,000 to insure the house (say, the loan balance) because the flood policy has an 80% coinsurance clause. That means, if you only partially insure the house, they only partially pay the claim. So, if you had a claim, with $40,000 of damage, they would pay . . . not $35,000 less your deductible, but closer to $20,000 which leaves the bank holding a note on a house that YOU can’t afford to repair, and they don’t want to end up owning it!Flood rates and terms are set by the federal government, so there isn’t any negotiation room.**Also. Check with your mortgage company. Just because your area *might* be re-rated (ok, it will LIKELY be rerated, but that doesn’t mean you won’t be in a 100 year flood plain any more!), that does NOT change the original terms of the mortgage. So if the ORIGINAL mortgage terms require that you buy flood insurance, THOSE TERMS DON’T CHANGE WHEN YOUR AREA IS RERATED. You’ll have to get another mortgagee, if you’re not going to be in a 100 year flood zone. Additionally, if you DO decide to change mortgages, keep in mind that when you CANCEL your flood policy, you do NOT get a refund on any unearned premium, unless you can prove you sold the house. Being changed from a flood zone A to a B, meaning you don’t have to carry flood insurance, does NOT allow you to cancel the policy and get any kind of refund, and you are NOT eligible for a re-rate until the renewal date.

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